Dame Shirley Porter, the Tesco heiress and former leader of the Tories' flagship Westminster council, was yesterday branded a liar by a High Court judge and ordered to pay pounds 27 million in surcharges in the 'homes for votes' scandal.

Lord Justice Rose and two other judges refused Dame Shirley and David Weeks, her former deputy, leave to appeal against the findings, which land them with the biggest surcharge in the history of local government. Most of the cost will fall on Dame Shirley, as Mr Weeks has few assets to meet the bill.

The judges upheld the finding of a seven-year, pounds 3 million investigation by John Magill, district auditor for Westminster, that they were guilty of 'wilful misconduct' and 'disgraceful and improper gerrymandering' between 1987 and 1989.

The scandal centred on Dame Shirley's ordering the designation of eight council wards for a sale of council homes, with the intention of preventing Labour winning control of the council.

The policy, which eventually cost the council pounds 27 million, led to charges, upheld by the auditor, that she had been involved in gerrymandering.

Yesterday Lord Justice Rose, sitting with Mr Justice Latham and Mr Justice Keene, said Dame Shirley and Mr Weeks 'lied to us as they have done to the auditor because they had the ulterior purpose of altering the electorate' in eight marginal wards by selling council homes cheaply to people more likely to vote Conservative. During the High Court hearing, Anthony Scrivener QC, for Dame Shirley, said she believed, after taking legal advice, that a policy of keeping council homes empty and selling them cheaply in the hope of boosting support for the Conservative Party in marginal wards would be lawful and 'judge-proof', as long as it was implemented city-wide.

But the judges said that both knew their targeting policy was unlawful and they had improperly decided to dress up the policy 'in city-wide clothes'.

The judges added: 'Their purpose throughout was to achieve unlawful electoral advantage. Knowledge of the unlawfulness and such deliberate dressing-up both inevitably point to - and we find - wilful conduct on behalf of each of them.' In May last year, Mr Magill made a total of three councillors and three council officials 'jointly and severally' liable to repay the pounds 31.6 million he estimated to have been wrongly spent on the unlawful house sales policy.

Yesterday the judges reduced the estimated loss to the council to pounds 27,023,376 and said three of the accused were not guilty of wilful misconduct and quashed the council's surcharge against them.

Mr England was completely cleared, but Mr Hartley was found to have acted unlawfully and Mr Phillips to have acted improperly and been in breach of duty. But neither was found by the judges to be guilty of wilful misconduct, which would have led them to face a surcharge.

The position of Paul Hayler, the former divisional housing director, whose appeal was stayed because of illness, remains unclear. It is thought that the district auditor is unlikely to enforce the surcharge against him, even though he has not been officially cleared by the court.

Dame Shirley vowed - despite being landed with an additional pounds 2 million in costs - to continue the fight. She said in a statement that she was surprised by the ruling against her and Mr Weeks although she was delighted for those who had been cleared of unlawful misconduct. She added: 'We have already been advised in light of the decision regarding the others that we have strong grounds for appeal.' Mr Magill welcomed the decision as 'terrific'.

He was, however, criticised by the judges for taking so long to investigate and for calling a press conference to announce his preliminary findings.

They said: 'Whether Parliament contemplated so gigantic an investigation by an auditor into an objection to a local authority accounts we very much doubt.' Two former Labour Westminster councillors, Karen Buck, now MP for Regents Park and Kensington North, and Peter Bradley, now MP for the Wrekin, expressed satisfaction at the verdict.

Mr Bradley said: 'But it is grim satisfaction, because this process has taken 10 years. The people who were the principal victims of her regime - homeless people forced to stay in asbestos-ridden properties or appalling bed-and-breakfast accommodation - will get no recompense whatsoever.'